Solid Cash-Flow Growth Makes These 4 Stocks Worth Buying Now

Picking profit-making stocks for investment might be a popular choice but not flawless. This is because even a profit-making company can have a deficiency of cash flow and become bankrupt while meeting its obligations. However, one can effectively judge a company’s resilience by looking at its efficiency in generating cash flows.  

In this regard, stocks like Sterling Infrastructure, Inc. STRL, Griffon Corporation GFF, Limbach Holdings, Inc. LMB and Willdan Group, Inc. WLDN are worth buying.

Cash, which is indeed the lifeblood of any business, gives a company the flexibility to take investment decisions and the fuel to run its growth engine. Moreover, cash shields a company from market turmoil and indicates that profits are being channelized in the right direction, indicating a company’s true financial health.

Uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the pandemic, have all the more reestablished the relevance of analyzing a company’s cash-generating efficiency.

To figure out this efficiency, one needs to consider a company’s net cash flow. While in any business, cash moves in and out, it is net cash flow that explains how much money a company is actually generating.

If a company is experiencing a positive cash flow, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in the business, endure downturns and finally return wealth to shareholders. On the other hand, a negative cash flow indicates a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.

However, having a positive cash flow merely does not secure a company’s future growth. To ride on the growth curve, a company must have its cash flow increasing because that indicates management’s efficiency in regulating its cash movements and less dependency on outside financing for running its business.

Therefore, keep yourself abreast with the following screen to bet on stocks with rising cash flows.

Screening Parameters:

To find stocks that have seen increasing cash flow over time, we ran the screen for those whose cash flow in the latest reported quarter was at least equal to or greater than the 5-year average cash flow per common share. This implies a positive trend and increasing cash over a period of time.

In addition to this, we chose:

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the company’s future performance.

Current Price greater than or equal to $5: This sieves out low-priced stocks.

VGM Score of B or better: This score is also of great assistance in selecting stocks. Importantly, this scoring system helps in picking winning stocks in their industry categories.

Here are four out of 12 stocks that qualified for the screening:

Sterling operates through subsidiaries within segments specializing in E-Infrastructure, Building and Transportation Solutions principally in the United States, mainly across the Southern, Northeastern, Mid-Atlantic and Rocky Mountain regions and the Pacific Islands. 

The Zacks Consensus Estimate for Sterling’s current-year earnings has moved 13.6% north in the past month. STRL currently has a VGM Score of A.

Griffon Corp., a diversified management and holding company, operates through wholly owned subsidiaries. It provides consumer and professional, as well as home and building products.

The Zacks Consensus Estimate for Griffon Corp.’s fiscal 2025 earnings per share has been revised 2.3% upward in the past month. GFF has a VGM Score of A.

Limbach Holdings provides building systems. The company engineers, constructs and services mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems.

The Zacks Consensus Estimate for Limbach Holdings’ 2025 earnings has moved 9.9% north in the past month. LMB has a VGM Score of A.

Willdan Group is a provider of professional technical and consulting services to utilities, private industry and public agencies at all levels of government. WLDN enables its clients to realize cost and energy savings by providing a wide range of specialized services.

The Zacks Consensus Estimate for Willdan Group’s current-year earnings has improved 17% over the past month to $2.75. WLDN has a VGM Score of B.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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This article originally published on Zacks Investment Research (zacks.com).

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